Vacancy inches higher with anticipated new supply to largely deplete construction pipeline by year-end
Tenant preferences are becoming increasingly clear and having an impact. Suburban Class A product has seen the strongest rental performance, increasing 7.8% since Q1 2020, meanwhile, Downtown Class B has seen declining rates, reflecting the priority for high-quality, well-amenitized office buildings that minimize commute times.
Q2 was a quarter for moderation with most markets reporting softening conditions, but not to the same degree as seen at the start of the year. National quarterly net absorption for example recorded half of the total seen in Q1, however, remained in negative territory. Only two markets meanwhile posted contracting vacancy: Calgary and Halifax.
Sublet vacancy marginally increased this quarter and managed to maintain being equal to 3.4% of inventory. Eight of 10 markets have sublease levels less than 3.0% of inventory.
Construction has been steadily declining since Q2 2022 as projects are completing with very few kicking-off. Should this continue, anticipated Q3 and Q4 deliveries will lower the 11.5 million sq. ft. pipeline to 4.2 million sq. ft., the lowest level since 2005.
To read the full report, visit the CBRE website.
